MTBE price surge plunges ETBE premium into negative territory

12 January 2012 23:59[Source: ICIS news]

LONDON (ICIS)--Sharp increases in the price of European methyl tertiary butyl ether (MTBE) this week have led to a similarly drastic drop in ethyl tertiary butyl ether (ETBE) premiums, traders said on Thursday.

ETBE is often traded with a premium over MTBE, so changes to the price of the latter have a knock-on effect for that of the former.

MTBE prices have moved up by $152–160/tonne (€120–126/tonne) so far this week to $1,390–1,397/tonne FOB (free on board) AR (Amsterdam-Rotterdam), on tight supply.

ETBE demand is weak and buyers are unreceptive to price rises, particularly those of the magnitude above. To minimise the effect of the MTBE gains on the price of ETBE, premiums for the latter have decreased to such an extent that material has traded at a discount of $15-20/tonne below MTBE, down from last week’s premium of $75-150/tonne.

Absolute ETBE prices are assessed at $1,341–1,346/tonne FOB ARA (Amsterdam-Rotterdam-Antwerp) this week. Despite the drop in premiums, this represents an increase of $15–85/tonne.

Sources think ETBE will not be discounted for long, given that most consider the high MTBE prices to be unsustainable. Furthermore, February MTBE is backwardated by 20 factor points (a measure of the value of MTBE relative to gasoline) below prompt, or about $190/tonne (assuming flat gasoline pricing).

MTBE and ETBE are blended into gasoline as oxygenate boosters. ETBE is made from bio-ethanol, so qualifies as a biofuel, which is why it usually trades at a premium to MTBE.